What is a supply chain? Components and roles of a supply chain

Understanding what a supply chain is helps businesses improve product and service quality and enhance business efficiency. Each component in the supply chain plays an important role in optimizing costs, performance and meeting customer needs. In the article below, 1C Vietnam will share what supply chain management is so that businesses can apply it in practice. Let's find out now!

1. What is a supply chain?

A supply chain is an integrated system of organizations, people, activities, information, and resources involved in the production, marketing, and distribution of a product from raw materials to final consumers. This system includes activities such as procurement of raw materials, manufacturing, packaging, transportation, storage, and distribution of products.

Here is an example of a supply chain in the automotive industry: Before a consumer buys a car, iron ore is mined from the ground and sent to a factory to be turned into steel. The steel is then made into a car frame. To complete the car, the manufacturer assembles various parts such as the engine, battery, electronic components, rubber tires, and metal body. The car is shipped to showrooms, retailers, and dealers for sale to the end consumer.

2. What is supply chain management?

Supply Chain Management (SCM) is the process of overseeing and coordinating activities involved in moving goods or services from the point of production to the final consumer. This process includes the integration of activities such as raw material procurement, warehousing, transportation, manufacturing, and distribution.

The goal of supply chain management is to optimize the efficiency and effectiveness of the entire supply chain, from the creation of a product or service to its delivery to the customer. Supply chain management requires close cooperation between supply chain partners, including suppliers, manufacturers, distributors, and customers.

3. Components in the supply chain

In modern business, the supply chain is a key factor that helps businesses optimize production processes, reduce costs and improve service quality. Components of the supply chain include raw material suppliers, manufacturers, distributors and consumers. Each party plays an important role in the success of the system. Let's find out more details with 1C Vietnam in the content below:

3.1 Raw material suppliers

Raw material suppliers are entities that provide raw materials, materials, parts and components for the production process. They can be manufacturing companies, farms, mineral mines or other service providers.

3.2 Manufacturer

A manufacturer is an entity that transforms raw materials into finished products. They can be a factory, an assembly company, or a processing company. Raw material suppliers and manufacturers are closely linked, and any problem on either side can impact the entire supply chain.

3.3 Distributors

Distributors are entities that buy products from manufacturers and resell them to retailers or consumers. They can be trading companies, agents or warehouses.

3.4 Retail agent of goods

A retailer is a business that sells products directly to consumers. Some common retail models include grocery stores, convenience stores, supermarkets, and online stores.

3.5 Customers

The consumer is the final element in the supply chain, the one who uses the product or service. This element forms a complete loop in the supply chain.

In addition, the supply chain also includes other components such as:

• Logistics service providers: Provide transportation, warehousing, delivery, packaging, insurance and other services that support the movement of products.
• Financial service provider: Provides financial services such as payments, credit, insurance related to the supply chain.

4. The role of supply chain for business

The main role of the supply chain is to ensure the efficiency of resources in production and business and the continuity of the process of providing goods and services. Specifically as follows:

• Continuous supply: Ensure continuous production and business, effectively meeting market demand.
• Cost Optimization: Manage production, transportation and storage processes efficiently to minimize costs.
• Quality Assurance: Establish rigorous testing procedures to ensure products meet quality standards.
• Risk Management: Minimize risk by diversifying and intelligently allocating supplies.
• Use technology and information systems: Collect data to monitor and solve problems quickly.
• Enhance engagement: Build strong relationships and ensure continuous communication between partners to improve overall system performance.

5. Popular supply chain diagrams today

Supply chains often apply the international supply chain management model SCOR (Supply Chain Operations Reference). This model is a globally applied standard framework for managing and optimizing supply chain operations. SCOR divides the international supply chain into four main parts:

• Plan : The first step in international supply chain management is detailed planning, defining the overall strategy for supply chain operations. The contents include plans for production, storage, transportation and distribution of products.
• Source : This step involves managing supplies in the international supply chain. Businesses need to search, select and negotiate with global suppliers to ensure a stable, quality supply for the entire chain.
• Production (Make) : This is the step directly related to the production of products/services at factories and production centers. The contents that need to be managed include production processes, product quality, and operation of machinery, materials, and labor.
• Delivery : The final step is to manage the delivery operations, which includes packaging, storing, distributing, and shipping products to customers globally. Specifically, the business will have comprehensive control over transportation management, customer service management, warehouse management, and product location management.

6. Main characteristics of supply chain

In addition to the concept of what a supply chain is , the characteristics of the chain are also important factors that help businesses optimize the performance of the system. To build an effective supply chain, businesses need to pay attention to the following characteristics:

• Synchronize with business strategy and goals: An effective supply chain is one that is integrated into the business development strategy at each specific stage and is suitable for the specific characteristics of the business. This system needs to be synchronized with the available resources as well as the business's operating market.
• Meeting customer needs: An efficient supply chain helps produce products that meet the needs of each customer segment, ensuring timely delivery of goods, and timely response to market needs and trends.
• Matching the market position: Regardless of the market position, an effective supply chain must be built to suit the specific position and characteristics of the business. This process includes choosing the right suppliers and target customers.
• Quick adaptation to change: Effective supply chain management helps companies adapt quickly to changes in the market and competitors. Continuous exchange of information helps managers make appropriate and timely decisions.

7. Common types of supply chains

With the development of technology and globalization, supply chain models are becoming more complex and flexible. To improve operational efficiency and meet customer needs, businesses need to constantly update new trends as well as choose the appropriate supply chain model. Popular types of supply chain models today include:

8. Current status of supply chain management in Vietnam

Currently, some businesses in Vietnam do not fully understand the importance of supply chain and logistics in the market. This leads to them ignoring important components of the supply chain and focusing only on Marketing and Sales.

To optimize their supply chains, businesses need to comprehensively assess their operations and consider whether the supply chain has met market needs and served the organization's goals well. This assessment helps to detect problems and provide timely solutions. If support is needed in optimizing the process and operation of the system, 1C Vietnam is ready to provide the most modern solutions to help businesses keep up with global supply chain development trends.

9. How to build an effective supply chain for your business

Building an efficient supply chain is an important factor for businesses to achieve sustainable success. Below are the necessary steps and strategies to establish an efficient supply chain system in a business:

9.1 Real-time supply chain planning

Real-time supply chain planning is the development of flexible, optimized management processes to ensure that production, transportation and warehousing activities are efficient and meet customer needs in a timely manner. This process includes detailed and timely demand assessment, production planning and order management. Continuous management and regular evaluation help improve the performance and flexibility of the supply chain, thereby enhancing competitiveness and responding quickly to market changes.

9.2 Building quality relationships with suppliers

To build quality supplier relationships, businesses need to adhere to fundamental principles such as trust, transparency and respect. Quality relationships not only ensure a stable supply but also bring benefits such as reduced costs, increased flexibility and assured product quality. This approach also encourages long-term cooperation and exploits opportunities for continuous improvement in the supply chain.

9.3 Ensure consistency and continuous communication

To ensure consistency and continuous communication in the supply chain, businesses need to apply modern information technologies and systems. This helps optimize data management, closely monitor production and transportation processes. Through sharing information and clear production plans, supply chain components can respond to rapidly changing market demands and minimize risks.

9.4 Using technology to improve processes

Automating supply chain management activities helps reduce errors and increase efficiency. Automated management systems such as ERP (Enterprise Resource Planning) integrate processes from production, warehousing, to transportation, helping to track and coordinate all activities easily and accurately. Enterprises can refer to 1C Vietnam's 1C:ERP solution to start the process of automating the supply chain.

Here are some of the advantages of 1C:ERP:

• Flexibility: 1C:ERP is designed on a low-code platform, minimizing supplier dependency and enhancing adaptability to changing business needs.
• Rapid customization: The system allows rapid customization to meet the specific requirements of each supply chain, easily integrating with other specialized solutions.
• Cross-platform compatibility: The solution is compatible with most popular database management software, operating systems and browsers. From there, businesses can easily synchronize supply chain management processes.
• Full functionality: 1C:ERP provides full functionality for different business models such as trade, service, manufacturing, sales management, purchasing, warehousing, human resources, finance and projects, helping businesses operate efficiently.

Hopefully, through the above article, your business has understood what a supply chain is and how to build an effective chain in practice. With the rapid development of science and technology, businesses can apply professional supply chain management solutions such as 1C:ERP to improve operational efficiency as well as optimize operating costs. If you have any questions about the supply chain as well as the 1C:ERP system, please contact 1C Vietnam for support.